History
The first deliberately slow password-based key derivation function was called "CRYPT" and was published by Robert Morris in 1978 for encrypting Unix passwords. It used an iteration count of 25, a 12-bit salt and a variant of DES as the sub-function. (DES proper was avoided in an attempt to frustrate attacks using standard DES hardware.) It also limited passwords to a maximum of eight ASCII characters. While it seemed a great advance at the time, CRYPT(3) is now considered inadequate. The iteration count, designed for the PDP-11 era, is too low, 12 bits of salt is an inconvenience but does not stop precomputed dictionary attacks, and the 8 character limit prevents the use of stronger passphrases.
Modern password-based key derivation functions, such as PBKDF2 (specified in RFC 2898), use a cryptographic hash, such as MD5 or SHA1, more salt (e.g. 64 bits) and a high iteration count (often 1000 or more). There have been proposals, such as scrypt to use algorithms that require large amounts of computer memory and other computing resources to make custom hardware attacks more difficult to mount.
In 2009, a new key strengthening algorithm, scrypt, was introduced that demands large amounts of memory to evaluate, limiting the use of custom, highly parallel hardware to speed up key testing.
Read more about this topic: Key Stretching
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